February 11, 2010
Case # 09CF1067
ROOFING CONTRACTOR CONVICTED IN CALIFORNIA'S LARGEST PREMIUM INSURANCE FRAUD
SCAM
*Defendant's wife is charged as a co-defendant in this case
SANTA ANA - A roofing contractor was convicted today of committing premium insurance fraud with his
wife, in one of the largest known Workers' Compensation Insurance fraud case in California's history.
Michael Vincent Petronella, also known as Michael Constantine, 51, was found guilty by a jury of 33
felony counts of insurance fraud and the sentencing enhancement for aggravated white collar crime
over $500,000 was found true. The defendant now faces a sentence ranging from probation up to 48
years and eight months in state prison at his sentencing on April 23, 2010, at 9:00 a.m. in Department
C-42, Central Justice Center, Santa Ana. Restitution will be determined at a later date.
Petronella's wife Devon Lynn Kile, 44, both of Laguna Hills, is also charged in this case. Kile is
in-custody on $250,000 bail and is scheduled for a pre-trial mental health competency hearing Feb. 18,
2010, at 9:00 a.m. in Department C-58, Central Justice Center, Santa Ana.
"This case is an outrageous example of a person who lavishly spent illegal profits on luxury goods by
cheating the Workers' Compensation Insurance system and legitimate businesses that play by the
rules," said Orange County District Attorney Tony Rackauckas. "Cheaters who defraud the system will
be trading in their Pradas for prison garb."
"We simply will not tolerate anybody scamming the system and driving up the costs for legitimate
businesses," said Insurance Commissioner Steve Poizner. "I'm pleased that a jury convicted these
swindlers on 33 counts of insurance fraud, helping execute justice and remind others committing
workers' compensation fraud that we will find you and you will be prosecuted."
WHAT IS PREMIUM INSURANCE FRAUD?
California law requires that all employers maintain workers' compensation insurance for their employees.
Payroll records showing the number of employees and their income must be submitted to both the
workers' compensation insurance company and EDD, who oversee the collection of payroll taxes.
Workers' Compensation Insurance rates are determined by a formula, which takes into consideration the
number and type of employees and the company's history of injury claims.
Premium insurance fraud is committed when an employer intentionally misrepresents to the State or
insurance company the number of employees, the type of work performed, the amount of payroll, and
the loss history. These illegal misrepresentations allow deceitful employers to calculate and purchase
workers' compensation insurance at a significantly lower premium rate, or to avoid purchasing the
insurance at all. This practice places their competitors at a disadvantage because it forces them to
compete against a company with fraudulently lower operating costs.
Premium fraud drives up the cost of insurance premiums for legitimate businesses that pay higher rates
for their employees' workers' compensation insurance coverage. These legitimate businesses are less
competitive against crooked companies who are able to under-bid their competitors due to lower
business costs resulting from insurance fraud. This also endangers injured employees who may be
denied workers' compensation benefits intended to meet their physical, psychological, and financial
needs for a work-related injury.
CIRCUMSTANCES OF PREMIUM INSURANCE FRAUD CASE
Petronella is a roofing and general building contractor. At the time of their arrest, Petronella and Kile
owned three businesses including Petronella Corporation, Western Cleanoff, Inc., and The Reroofing
Specialists, Inc. (also known as Petronella Roofing). The businesses were located in Costa Mesa and
Cathedral City, Riverside County, and had clients primarily in Southern California which included the
Ocean Institute in Dana Point, the Pacific Amphitheater in Costa Mesa, and other commercial properties.
In March 2006, an employee of Petronella fell from a roof and sustained injuries. A payroll stub was
submitted to the State Compensation Insurance Fund (SCIF), listing his employer as Western Cleanoff,
Inc., which SCIF did not insure. SCIF is a quasi-governmental non-profit insurance company established
by the California State Legislature. SCIF reported the suspected fraudulent claim to the Orange County
District Attorney's Office (OCDA) and Department of Insurance (DOI).
Following a 2-year investigation by the OCDA, with assistance from several agencies (listed below),
Petronella and Kile were arrested April 29, 2009, at their Laguna Hills home. A search of six locations
including two residences, two businesses, a storage unit and a Certified Public Accountant's office
turned up more than $500,000 in jewelry, $51,000 cash, and an application from Kile to be featured on
the Bravo series Real Housewives of Orange County. A Receiver was appointed by the Court to oversee
the seized property and determine which items and properties should be held as collateral or sold at
auction as payment for back due taxes.
THE PEOPLE ARGUED DURING TRIAL:
Beginning in 2000, Petronella and Kile obtained Workers' Compensation Insurance for their three
companies through SCIF. Between 2000 and 2008, Petronella fraudulently submitted 42 claims for
uninsured injured workers and underreported $29 million in payroll to SCIF in order to avoid paying his
Workers' Compensation Insurance premiums. The couple engaged in a scheme that resulted in SCIF
incurring more than $253,000 in uncovered injured worker claims and insurance premium losses in the
millions. Petronella and Kile reported $3 million in payroll to SCIF, while having an actual payroll of $32
million, ten times more than reported.
Beginning in 2000, SCIF performed annual audits of Petronella and Kile's companies, during which they
provided false employee and payroll records. Between 2000 and 2008, Petronella and Kile fraudulently
reported a $2.9 million payroll to SCIF for The Reroofing Specialists, Inc., while reporting $16.6 million in
payroll to EDD for the same company during the same time period. Beginning in 2003, Petronella and
Kile fraudulently reported no payroll to SCIF for Western Cleanoff, Inc., while reporting in excess of
$13.9 million in payroll to EDD for the same company between 2000 and 2008. Between 2007 and 2008,
they paid unreported payroll in excess of $200,000 in cash to day laborers.
In order to avoid paying Workers' Compensation Insurance for all of his employees, Petronella and Kile
underreported the number of workers employed at each business, including claiming none for Western
Cleanoff, Inc. Petronella fraudulently filed 42 claims for employees injured while working for The
Reroofing Specialists, Inc. to obtain insurance coverage for the injured employee without paying for the
insurance. The injured employees have since been identified as Western Cleanoff, Inc. and Petronella,
Inc. employees.
The couple, who lived in Laguna Hills at the time of their arrest, owned five properties in California and
Texas and multiple luxury vehicles including a Bentley, two Ferraris, and a Range Rover. Between 2005
and 2007, Petronella and Kile spent more than $2.1 million on their American Express credit card for
personal items. They spent thousands of dollars on jewelry, shoes, clothes, and other personal items at
stores including Balenciaga, Bloomingdale's, Chanel, Christian Louboutin, Gucci, Kitson,
Neiman-Marcus, Nordstrom, Yves Saint Laurent, and others.
This case was investigated by the OCDA and the Orange County Premium Fraud Task Force, a
collaboration of investigators from OCDA, DOI, EDD, Franchise Tax Board, and Contractors State
License Board.
Deputy District Attorney Shaddi Kamiabipour of the Workers' Compensation Insurance Fraud Unit is
prosecuting this case.
Case # 09CF1067
ROOFING CONTRACTOR CONVICTED IN CALIFORNIA'S LARGEST PREMIUM INSURANCE FRAUD
SCAM
*Defendant's wife is charged as a co-defendant in this case
SANTA ANA - A roofing contractor was convicted today of committing premium insurance fraud with his
wife, in one of the largest known Workers' Compensation Insurance fraud case in California's history.
Michael Vincent Petronella, also known as Michael Constantine, 51, was found guilty by a jury of 33
felony counts of insurance fraud and the sentencing enhancement for aggravated white collar crime
over $500,000 was found true. The defendant now faces a sentence ranging from probation up to 48
years and eight months in state prison at his sentencing on April 23, 2010, at 9:00 a.m. in Department
C-42, Central Justice Center, Santa Ana. Restitution will be determined at a later date.
Petronella's wife Devon Lynn Kile, 44, both of Laguna Hills, is also charged in this case. Kile is
in-custody on $250,000 bail and is scheduled for a pre-trial mental health competency hearing Feb. 18,
2010, at 9:00 a.m. in Department C-58, Central Justice Center, Santa Ana.
"This case is an outrageous example of a person who lavishly spent illegal profits on luxury goods by
cheating the Workers' Compensation Insurance system and legitimate businesses that play by the
rules," said Orange County District Attorney Tony Rackauckas. "Cheaters who defraud the system will
be trading in their Pradas for prison garb."
"We simply will not tolerate anybody scamming the system and driving up the costs for legitimate
businesses," said Insurance Commissioner Steve Poizner. "I'm pleased that a jury convicted these
swindlers on 33 counts of insurance fraud, helping execute justice and remind others committing
workers' compensation fraud that we will find you and you will be prosecuted."
WHAT IS PREMIUM INSURANCE FRAUD?
California law requires that all employers maintain workers' compensation insurance for their employees.
Payroll records showing the number of employees and their income must be submitted to both the
workers' compensation insurance company and EDD, who oversee the collection of payroll taxes.
Workers' Compensation Insurance rates are determined by a formula, which takes into consideration the
number and type of employees and the company's history of injury claims.
Premium insurance fraud is committed when an employer intentionally misrepresents to the State or
insurance company the number of employees, the type of work performed, the amount of payroll, and
the loss history. These illegal misrepresentations allow deceitful employers to calculate and purchase
workers' compensation insurance at a significantly lower premium rate, or to avoid purchasing the
insurance at all. This practice places their competitors at a disadvantage because it forces them to
compete against a company with fraudulently lower operating costs.
Premium fraud drives up the cost of insurance premiums for legitimate businesses that pay higher rates
for their employees' workers' compensation insurance coverage. These legitimate businesses are less
competitive against crooked companies who are able to under-bid their competitors due to lower
business costs resulting from insurance fraud. This also endangers injured employees who may be
denied workers' compensation benefits intended to meet their physical, psychological, and financial
needs for a work-related injury.
CIRCUMSTANCES OF PREMIUM INSURANCE FRAUD CASE
Petronella is a roofing and general building contractor. At the time of their arrest, Petronella and Kile
owned three businesses including Petronella Corporation, Western Cleanoff, Inc., and The Reroofing
Specialists, Inc. (also known as Petronella Roofing). The businesses were located in Costa Mesa and
Cathedral City, Riverside County, and had clients primarily in Southern California which included the
Ocean Institute in Dana Point, the Pacific Amphitheater in Costa Mesa, and other commercial properties.
In March 2006, an employee of Petronella fell from a roof and sustained injuries. A payroll stub was
submitted to the State Compensation Insurance Fund (SCIF), listing his employer as Western Cleanoff,
Inc., which SCIF did not insure. SCIF is a quasi-governmental non-profit insurance company established
by the California State Legislature. SCIF reported the suspected fraudulent claim to the Orange County
District Attorney's Office (OCDA) and Department of Insurance (DOI).
Following a 2-year investigation by the OCDA, with assistance from several agencies (listed below),
Petronella and Kile were arrested April 29, 2009, at their Laguna Hills home. A search of six locations
including two residences, two businesses, a storage unit and a Certified Public Accountant's office
turned up more than $500,000 in jewelry, $51,000 cash, and an application from Kile to be featured on
the Bravo series Real Housewives of Orange County. A Receiver was appointed by the Court to oversee
the seized property and determine which items and properties should be held as collateral or sold at
auction as payment for back due taxes.
THE PEOPLE ARGUED DURING TRIAL:
Beginning in 2000, Petronella and Kile obtained Workers' Compensation Insurance for their three
companies through SCIF. Between 2000 and 2008, Petronella fraudulently submitted 42 claims for
uninsured injured workers and underreported $29 million in payroll to SCIF in order to avoid paying his
Workers' Compensation Insurance premiums. The couple engaged in a scheme that resulted in SCIF
incurring more than $253,000 in uncovered injured worker claims and insurance premium losses in the
millions. Petronella and Kile reported $3 million in payroll to SCIF, while having an actual payroll of $32
million, ten times more than reported.
Beginning in 2000, SCIF performed annual audits of Petronella and Kile's companies, during which they
provided false employee and payroll records. Between 2000 and 2008, Petronella and Kile fraudulently
reported a $2.9 million payroll to SCIF for The Reroofing Specialists, Inc., while reporting $16.6 million in
payroll to EDD for the same company during the same time period. Beginning in 2003, Petronella and
Kile fraudulently reported no payroll to SCIF for Western Cleanoff, Inc., while reporting in excess of
$13.9 million in payroll to EDD for the same company between 2000 and 2008. Between 2007 and 2008,
they paid unreported payroll in excess of $200,000 in cash to day laborers.
In order to avoid paying Workers' Compensation Insurance for all of his employees, Petronella and Kile
underreported the number of workers employed at each business, including claiming none for Western
Cleanoff, Inc. Petronella fraudulently filed 42 claims for employees injured while working for The
Reroofing Specialists, Inc. to obtain insurance coverage for the injured employee without paying for the
insurance. The injured employees have since been identified as Western Cleanoff, Inc. and Petronella,
Inc. employees.
The couple, who lived in Laguna Hills at the time of their arrest, owned five properties in California and
Texas and multiple luxury vehicles including a Bentley, two Ferraris, and a Range Rover. Between 2005
and 2007, Petronella and Kile spent more than $2.1 million on their American Express credit card for
personal items. They spent thousands of dollars on jewelry, shoes, clothes, and other personal items at
stores including Balenciaga, Bloomingdale's, Chanel, Christian Louboutin, Gucci, Kitson,
Neiman-Marcus, Nordstrom, Yves Saint Laurent, and others.
This case was investigated by the OCDA and the Orange County Premium Fraud Task Force, a
collaboration of investigators from OCDA, DOI, EDD, Franchise Tax Board, and Contractors State
License Board.
Deputy District Attorney Shaddi Kamiabipour of the Workers' Compensation Insurance Fraud Unit is
prosecuting this case.
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